Jose Receives a Nontaxable Distribution of Stock Rights During the Year

question 71

Multiple Choice

Jose receives a nontaxable distribution of stock rights during the year from Gold Corporation on January 30.Each right entitles the holder to purchase one share of stock for $50.One right is issued for every share of stock owned.Jose owns 100 shares of stock purchased two years ago for $5,000.At the date of distribution,the rights are worth $1,000 (100 rights at $10 per right) and Jose's stock in Gold is worth $6,000 (or $60 per share) .On December 1,Jose sells all stock rights for $13 per right.How much gain does Jose recognize on the sale?

• A)$1,300.
• B)$5819-
• C)$500.
• D)$0.
• E)None of the above.

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Definitions:

Selling Indulgences

A practice, most prominent in the Catholic Church during the Middle Ages, where the church claimed that payment could reduce the punishment for sins for the payer or for their loved ones in purgatory.

Rich

Having a great deal of money, resources, or assets; wealthy.

Radical Reformation

A 16th-century movement within Christianity that sought profound changes to the doctrines, practices, and structures of the church, beyond what mainstream Reformers proposed.

Lutheran

Pertains to the Christian denomination founded on the teachings and reforms of Martin Luther, emphasizing justification by faith alone.